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American Electric Power Company (NASDAQ:AEP) shareholders have earned a 30% return over the last year

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It's always best to build a diverse portfolio of shares, since any stock business could lag the broader market. Of course, the aim of the game is to pick stocks that do better than an index fund. American Electric Power Company, Inc. (NASDAQ:AEP) has done well over the last year, with the stock price up 25% beating the market return of 24% (not including dividends). Having said that, the longer term returns aren't so impressive, with stock gaining just 9.3% in three years.

So let's assess the underlying fundamentals over the last 1 year and see if they've moved in lock-step with shareholder returns.

View our latest analysis for American Electric Power Company

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the last year American Electric Power Company grew its earnings per share (EPS) by 14%. The share price gain of 25% certainly outpaced the EPS growth. This indicates that the market is now more optimistic about the stock.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

earnings-per-share-growth
NasdaqGS:AEP Earnings Per Share Growth January 21st 2025

We know that American Electric Power Company has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of American Electric Power Company, it has a TSR of 30% for the last 1 year. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that American Electric Power Company shareholders have received a total shareholder return of 30% over the last year. That's including the dividend. That's better than the annualised return of 3% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand American Electric Power Company better, we need to consider many other factors. For instance, we've identified 2 warning signs for American Electric Power Company (1 is a bit concerning) that you should be aware of.


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